Which of the Following Is an Advantage of Debt Financing

question 41

Multiple Choice

Which of the following is an advantage of debt financing?

• A) The interest payments a firm makes on debt are a tax-deductible expense.
• B) A firm using debt financing is not required to make fixed payments.
• C) It is less risky than equity financing.
• D) It is more flexible than equity financing.

Recognize the impact of the Fed's actions on banks' reserves and the money supply.

Learn the distinction between excess reserves, required reserves, and total reserves.

Understand the process through which money supply expands or contracts.

Recognize the differences and purposes of debit and credit card usage.

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Definitions:

AFN Formula

Additional Funds Needed formula, a financial tool used to estimate the additional amount of financing a firm will require in the future.

Forecasting Method

Techniques used to predict future aspects of a business or the economy, from sales to macroeconomic trends.

AFN Formula

Additional Funds Needed formula; a financial model that projects the additional financing required by a firm to support its desired level of growth.

Dividend Payout Ratio

The proportion of earnings a company pays to its shareholders in the form of dividends, typically represented as a percentage of the company’s net income.